February 01, 2010

Second Life Economy: Weak Growth in Q4 2009

Last week, Linden Lab released their fourth quarter 2009 and year-end results for the Second Life Economy. A few weeks earlier, Linden Lab released their raw economic data for the previous year.

Included in the raw data numbers were the missing Positive Monthly Linden Flow (PMLF) numbers from previous quarters. PMLF is the number of residents who experienced a profit before land costs are factored in. The PMLF figures are sometimes unavailable from the Lab - typically when those numbers turn negative.

But thanks to more complete raw economic statistic released by the Lab, the Herald Business Network anchors can report that Q2 2009 showed a 1.94% decrease in the number of people who experienced PMLF and a 0.37% decrease in the number of residents who experienced PMLF, showing two quarters of contraction. Due to those numbers, the Lab has switched to a revenue reporting system, reporting how residents made $55 million in revenue, counted as the amount of money cashed out minus the amount of money cashed in. The economics report however does not report if those numbers include currency exchanges in their calculations.

The other part of Quarter Profit per Capita (QPC) is Total Hours Logged (THL). This is the total number of hours residents spent logged in. The Lab reported a decrease in THL over Q3 and Q4, a 6.35% decrease and a 4.24% decrease respectively by the Herald's figures.

The Lab is again pointing to their anti-bot policy, which now includes a registration aspect and the fact that by looking at bands of users who spend certain amounts of time in SL, the only major decrease in use are the power users of SL, specifically, those who spend more than 300 hours per month in SL have dropped off significantly and those who spend between 201 and 300 hours in SL per month have also dropped off. Which raises the question of why did these people, who previously were severely invested in SL stop being as invested?

With the increased use of XstreetSL, the issue of whether in-world merchants need user hours is again at issue. According to the Lab's figures, XstreetSL represents 1% of total sales. Looking at the report, it appears that XstreetSL sales are included in total numbers when it comes to total sales and presumably PMLF.

Another point of fact with XstreetSL is that it includes a separate exchange, which is not included in the exchange volume reports. The last three quarters have shown $29 million dollars of trading volume on the Lindex per quarter. But with third party exchanges for other currencies plus XstreetSL, there is less demand on the Lindex.

Which brings us to QPC. The QPC for Q4 09 is 0.17, the highest its been since Q3 2008. QPC has been at 0.16 since Q4 2008. What this could mean is that with XstreetSL, you do not to use Second Life in order to give the Lindens your money.